The Pivot Within Asia: Japan – India Relations

September 11, 2014

Host: The Woodrow Wilson Center

Speakers:

Dr. Makoto Kojima, Professor, Takushoku University

Dr. Pratap Mehta, President, Centre for Policy Research

Dr. Satoru Nagao, Associate, Gakushuin University

History has always been an important part of East Asian politics and culture. However, now that China and the Republic of Korea have risen to become global economic powers, history is having a negative impact on Japan’s future economic and diplomatic potential. Buoyed in part by territorial disputes and historical slights dating back to WWII, relations between Japan and its neighbors have soured dramatically in recent years. The need for collaboration and cooperation in East Asia is becoming ever more apparent as China continues to emerge as the region’s leading military power, and use its power to unilaterally change the status-quo. Although historical disputes have thus far kept Japan and the ROK apart, Japanese Prime Minister Shinzo Abe seems intent on exercising Japan’s diplomatic muscle to attract regional partners that can boost Japan’s economic and strategic potential.

Of those options, Dr. Kojima believes that India is Japan’s best potential, labeling the two as “natural economic partners.” Beyond the fact that they are Asia’s two biggest democracies, both countries have very similar, complimentary security and economic concerns. Highlighting that the Japanese economy is defined largely by its technological prowess and capital, Dr. Kojima argues that it is a perfect fit to India, which has a huge workforce and, under PM Narendra Modi, has made domestic infrastructure development a top priority for the country.

Since 2003 India has been the largest recipient of official development assistance (ODA) from Japan. These funds were crucial in building the Delhi metro system, which Dr. Kojima claims was “instrumental in improving Indian infrastructure” and also set a standard for safety and efficiency for development projects throughout in India. In addition, Japanese firms are now leading the construction of the Delhi-Mumbai Industrial Corridor and the Dedicated Freight Corridor, two initiatives that are providing high skill labor jobs and promise to cut future costs and transportation times.

Outside of state sponsored assistance, Japanese interest in India has grown drastically over the past five years. In 2007, only 438 Japanese businesses were invested in India; today Japan is India’s fourth largest outside investor with approximately 1100 businesses invested in Indian companies. This economic bond was only strengthened when PM Abe, while meeting with PM Modi in Tokyo two weeks ago, pledged 3.3 trillion yen to public and private financing in India and also pledged to double Japan’s foreign direct investment (FDI) in the country over the next five years.

In addition to converging economic interests and goals, Dr.’s Nagao and Mehta also see the two countries coming together on a variety of security fronts. Notably, both countries are engaged in territorial disputes with China – Japan over the Senkaku/Diaoyu Islands, and India over Kashmir and its mountainous Northern border. In addition, unilateral moves by China, such as its declared “9-Dash-Line” or the creation of its Air Defense Identification Zone, should be of concern to both countries. Both benefit greatly from maritime trade and have a vested interest in maintaining free and open trade routes. Both countries participation in the U.S. led Malabar naval exercises this year should be a step towards greater security cooperation and collaboration.

Unfortunately, despite these shared interests, there are challenges facing this developing relationship. The first is the pre-established power of China, which is the number one trading partner of both Japan and India. Although greater economic and military cooperation could serve as a hedge to Chinese unilateralism, both countries will need to strike a fine balance between their domestic interests, which are dependent on trade with China, and their regional interests and goals. Another potential obstacle is India’s own economy, and whether it can maintain its high growth rate. If regulations and red tape stall development and slow growth, international investments will decline and potentially hurt diplomatic ties.

There are no guarantees that this partnership will live up to its potential and succeed. However, as the region continues to rapidly change, it is important the countries identify common interests, collaborate, and work to bring about greater prosperity and security.

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12. September 2014 by Will Houstoun
Categories: East Asia, Economics | Comments Off